When credit is granted, business credit is often reported to the three credit reporting agencies (Equifax, Experian and Trans Union) for review. Business credit reports are typically made by credit reporting agencies when credit applications are submitted to them. These reports can be reviewed during the lending decision making process in order to determine whether or not to grant business credit. This credit decision can be based on business income, credit risk, credit history, profitability and credit availability. It can also be based on a number of other factors that are beyond the control of the lender. This article describes how business credit is granted and reviewed for eligibility.
Business credit is a closely held document in most businesses. To receive a business credit, a business will typically have to complete a loan application with a financial institution. After the application has been approved, a business credit report will be created showing the loan amount, interest rate and terms. Most business credit building plans focus on increasing the available credit lines and extending the term of the credit lines. The three major business credit reporting agencies (Equifax, Experian and Trans Union) work with lenders to gather the information to determine the creditworthiness of a business before an individual applies for a line of credit. This information can be complicated and many mistakes are made during the business credit building process.
Business credit building business credit reporting agencies follow a systematic process when evaluating credit worthy businesses. Each agency works in concert with the others to identify business needs, business assets and business liabilities. In order for a business to successfully build business credit, it must first obtain a d-u-n-s number from each of the three major business credit reporting agencies. By obtaining each of these numbers, businesses can determine their relative level of risk. Once a business has obtained the d-u-n-s number, it can use this number to compare its credit profile to other businesses.
After obtaining a d-u-n-s number from all three major business credit reporting agencies, a business can begin the process of building business credit. Commercial loan programs that are offered by the major business credit reporting agencies follow a standard procedure for evaluating risk. A business that is considered high risk will be required to put in more money up-front than a business that is considered low risk. This high-risk business will have to commit to long-term payments. However, when a business acquires credit from a commercial loan program, the business will be required to follow the agreement and complete the terms and conditions stated in the agreement.
When a business completes an agreement with a commercial funding program, it is responsible to provide documentation that it meets the terms and conditions of the agreement. Once the business has received its business credit scores from the three major business credit reporting agencies will provide the business with a report showing its credit and funding status. The business credit reporting agencies will also inform the company if any information on the accounts was inaccurate or incomplete. Businesses should contact the agencies immediately if they discover inaccurate information on their business credit scores. They can correct the information and stop the negative reporting once the error has been corrected.
There are several ways that a business can obtain its business . . . . . . credit scores and strong business credit reports. The first and most obvious way is through obtaining credit from the companies that participate in the three major business credit reporting agencies. Each one has its own credit reporting guidelines, credit approval processes and scores. Therefore, before a business applies for credit, it is important to carefully research each of the companies that it intends to do business with. Also, each company's application process can take several weeks or even months to complete.
Another way that a business can begin to build business credit scores and receive its strong business credit scores is through securing an account with them. Most business credit cards come with their very own credit building programs. This allows a business to begin building good and effective credit while also receiving the rewards that the credit cards offer.
However, there are several different methods that a person can use to begin building credit. These include purchasing goods from a particular credit card account, making regular payments on time and in full, paying off outstanding balances and making sure that all purchases are made within the limit based on the amount of credit available. The most common form of building credit is through general business credit. With general business credit, a person can look up credit history reports and see how lenders view their business practices.